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Common HMO Mortgage Questions

A HMO is a sophisticted property investment asset class. So whether you are a first time HMO property investor or an experienced HMO landlord, you might find our HMO FAQ’s helpful.

Do you have a HMO question?

If you have a question about HMO that is not covered here, please contact us.

What is a HMO property?

A HMO property is a house in mutliple occupation.

There are two types; a HMO Property and a Large HMO Property.

A property is classified as a HMO Property if both apply:

1) at least 3 tenants live at the property forming more than 1 household. A houshold can include a single person or members of the same family who live together.

2) you share the kitchen, bathroom or toilet facilities.

A property is classified as a Large HMO Property if all of these apply:

1) at least 5 tenants live at the property forming more than 1 household. A houshold can include a single person or members of the same family who live together.

2) you share the kitchen, bathroom or toilet facilities.

3) The property is at least 3 stories.

Do I need a HMO licence?

Yes and potentially yes!

There are two types of HMO Property and the rules around licences vary:

A HMO Property:

A HMO property may or may not need a licence depending on your area. Check with your local authority to see if they require a licence and how much it will cost.

A Large HMO Poperty:

If you have a Large HMO Property in England and Wales, then you will need a licence. Again speak to your local authority to obtain the licence.

A licence is valid for a maximum of 5 years and applies to each individual property you own. There are conditions which you have to fulfill but if you disagree with any condition you have to appeal to the First-Tier Tribunal:

1. The household must be suitable for the number of occupants. So the size of the bedrooms, living space, bathrooms and kitchen facilities all need to be apropariate for the number of tenants.

2. A fit and proper test is applied to the person responsible for running the HMO which will either be you or a managing agent . Criminal convictions, breach of landlord laws or code of practice are examples of things a council will consider if someone is fit and proper.

3. An annual gas safety certificate must be sent to the council each year.

4. Gas and fire alarms must be installed and maintained.

5. All electrical appliances need safety certificates and these must be provided to the council if and when requested.

6. A council may also have other stipulations and requirements.

If you run an unlicenced HMO property the fine is unlimited.

How much can I borrow on a HMO Mortgage

The amount you can borrow on a HMO mortgage will primarily be dictated by the rent the property wil achieve.

However the lender also looks at many other factors including your individual circumstances which can all have an impact on what you can do.

Check out our HMO mortgage calcualots below. They will give you a good indication, however every lender has different rules and if you want to be even more accurate, get in touch and speak to one of our experienced HMO mortgage broker who will be able to look into things in more detail.

What is the criteria for HMO Mortgages?

HMO mortgage lenders will assess you as much as the property you are looking to buy or remortgage. Typical things a lender will look at are:

You need to own your own home. Technically this isn’t always the case and there are sometimes exceptions to this rule. Examples might include an experienced property investor who happens to live with family or in rented accomodation. Also some people work in tied accomodation such as the armed forces, and there are exmptions that can apply depending on the lender. If you are not a homeowner and the above examples do not fit your circumstances, you could go on a mortgage with someone who is a homeowner.

You don’t need to be an experienced landlord. There are lenders who are comfotable with you being a HMO property investor for the first time, but you might need to be a homeowner (see point above).

Some lenders have a minimum age of 21 or 25, if you are older then this is not an issue.

The amount you can borrow will primarily be dependent on the rental the property will achieve. Take a look at our useful HMO mortgage calculator tool to get an idea.

You can get a HMO mortgage through limited companies or Limited liability partnerships (LLP’s).

Lenders have a maximum age at which you can apply and usually an age by which it must end. Always check with one of our independent mortgage brokers who will be able to guide you as lending rules can change.

Can I get a day one remortgage on a HMO property?

Short answer is yes.

This is really helpful if you have bought a property at auction with either cash or bridging finance and you want to either repay the brdiing loan or pull out your money that you have used by way of a remortgage. This is particulalry helpful if you are wanting to expand your portfolio by leveaging yourself and maintaining a stronger cash position so you can move on future opportunities.

It is also realy helpful in a scenario where you purchase a property which was not initially mortgageable to a HMO lender, as it may have needed some work. In these scenarios people either use cash to purchase or use some form of short term finance. Either way, they want to complete the work as quickly as possible, remortgage to either pay off the short term finance or recoup their own cash, and then rent the property out. Usually they have to wait at least 6 months before they can remortgage, however now they don’t. This really helps them to either recoup their cash quicker to enable them to move on to the next deal sooner or pay off the more expensive short term finance faster and therefore save themselves money.

HMO Mortgage Calculators

HMO Minimum Rent Calculator

HMO Mortgage Calculator

HMO Repayment Calculator

HMO Mortgage Guides

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Service that’s about smiles not sales

We may be mortgage brokers, but we’re not a bunch of bankers! We are independent which means we only work for you. Our team are incentivised not on sales, but providing the best service for you.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT.Barr Financial is a trading name of Benjamin Parry who is authorised and regulated by the Financial Conduct Authority. Our FCA Number is 506976. The FCA does not regulate some investment mortgage contracts. Barr Financial are also members of the NACFB (National Association of Commercial Finance Brokers). The Commercial Mortgage Sector is currently a non-regulated activity, as defined by the FCA. Therefore client protection is limited. The only recognised body is the National Association of Commercial Finance Brokers. The NACFB has established complaints and disciplinary procedures designed to eliminate unacceptable working practices amongst its members and Barr Financial subscribe to their standards.